Monday, April 20, 2020

As Air Freight Rates Soar Skyward So Comes an Easy Way to Compare the True Cost of Another Mode

Overland May Be Slower but the Price Differentials on the Silk Road Now are Astonishing
Shipping News Feature

UK – CHINA – With just about all carriers hard hit by the Covid-19 crisis many of those charged with ferrying air freight from China have been quick to ramp up their charges, particularly as the country seems to have got back into production mode in double quick time, with floods of PPE, respirators and the like demanded by other nations.

Actual commodities of course mean little to a carrier or 3PL, the bottom line is always the key for the keenly contested logistics sector and now one of Britain’s independent freight forwarding groups has introduced a clever way of ensuring shippers know exactly how the cost of air freight stacks up against their own overland services.

Davies Turner has added an air freight pricing mechanism for its direct, fixed-day, weekly Express China Rail service from Xi’an to the UK, such is the growing interest in the service from importers and shippers that have traditionally used air freight. Tony Cole, head of supply chain services at the Dartford, Kent headquartered company says:

“Since we launched the service in 2016, we have used the standard overland freight industry pricing technique, which is US $ per cubic metre. To make pricing more comprehensible for the air freight sector, we are now additionally quoting per kilo rates, which is the language that air freight importers are more used to dealing with. It makes a comparison between the relative costs of the intermodal rail service and air freight more immediately obvious.

“At the current rate of just $0.24 per kilo or 2,000 cm2 (with a minimum cost of $120), it is no surprise that our direct Express China Rail service is becoming of great interest to the air freight sector, which is facing sky high air freight rates out of China, with costs of $10 to $15 per kilo now being seen.

“Importers that traditionally move freight by air only need to factor in the slightly longer lead times for delivery by rail, to see what a massive cost saving they can benefit from by using our direct rail alternative. Importers that are able to remodel their supply chains to use the rail freight option may do so on a permanent basis.”

We have compared previously the various advantages of the three different modes carrying Chinese exports to Europe, air freight of course the fastest by far but also the most expensive, ocean container freight slower but the cheapest option and last, but seemingly not least for many, the ‘Iron Silk Road’ systems of train/truck combination.

Davies Turner says that to date the rail freight service from China to Europe has been around 70% cheaper than air freight, however these latest increases in the cost of air cargo have meant that price differential has rocketed, and they intend potential customers to understand just how big that difference is.

Photo: Rail borne transport has long been an effective method of crossing continents.